The Foreclosure Crisis

The Foreclosure CrisisDecember 1st, 2010

Homes across the United States are repeatedly falling into the hands of the federal banks. Foreclosed signs are filling the yards of the nation’s most popular cities and states, as well as their rural and suburban counterparts. The foreclosure issue is even more apparent now because the fall and winter seasons are generally the purchasing and investing times of year for real-estate, especially for second homes. Places like Aspen, Colorado, South Lake Tahoe, California, and Jackson Hole, Wyoming are at the forefront of the foreclosure crisis. People are first releasing their vacation homes in order to afford their primary residences. Ski resorts are usually the hardest hit locations because their colder seasons are, in most years, the busiest times for sales.

Not only are ski towns getting knocked around, but so are other popular vacation destinations throughout the country. After the burst of the housing bubble, the market declined drastically. As The Wall Street Journal reported, “about 18.8 million homes, or 14.4 percent of all houses and apartments, were vacant, according to the government survey. Without vacation homes, that rate would be 11%. The number of vacant homes has soared over the past four years from about 16 million at the start of 2006. It has been hovering around 19 million since the end of 2008. There are around 131 million housing units nationwide, according to the Census Bureau.” The chain of events, which brought about the decline of the economy a couple years back, continues to surface through the housing market today.

September’s mess

The month of September did not help or relieve the already poor housing market. As Alan Zibel of The Wall Street Journal reported, “Home prices fell in nearly half of U.S. metropolitan areas in the third quarter, indicating that the market is losing steam without government tax credits, according to an industry report.” These scandals involving home-loan servicers will most likely lead to other civil charges. Vanessa O’Connell from The Wall Street Journal reported how the attorneys general are looking into “whether home-loan servicers violated state laws against deceptive practices by submitting affidavits and foreclosure documents without confirming the paperwork's accuracy.” This will literally play out in a 50-state investigation because these home-loan servicers affected many people in virtually every city across the United States. Many people believe that the most appropriate way to handle this situation is to have these big business lenders pay large fines for what happened and then in turn subsidize the modification procedure.

A more positive light

Although this is a difficult time for many people who are trying to hold onto their houses and assets, it is also a critical time for first-time home buyers with steady jobs and incomes. For these types of people, this is one of the most ideal times to invest in real-estate. The National Association of Realtors’ (NAR) chief economist, Lawerence Yun, stated how “We’ve added 30 million people to the U.S. population over the past 10 years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum.” NAR also expects housing prices to move up slightly in 2011. Although the housing market fell with the deterioration of the economy a couple years back, the real-estate industry still shows signs of slowly creeping back upward to a more stable balance.